Recovery on a secured loan can be a difficult process without adequate knowledge of, and expertise in, all potential claims in law and equity; and restitution for challenged mortgage loans can be particularly problematic without proper representation. Recently, the lender of a mortgage loan on a home in Nassau County encountered precisely these issues when the borrower defaulted on payments and challenged the validity of his signature on the mortgage papers. After prior counsel was unable to foreclose on the mortgage based on the disputed signature, Adam Leitman Bailey, P.C.’s Colin Kaufman, Eric S. Askanase, and Vladimir Mironenko were engaged to represent the lender in securing its rights through litigation.
The owner of the property secured a mortgage loan from the client’s predecessor-in-interest and made payments on the mortgage for a number of years before abruptly ceasing all payments and defaulting on the loan. Through predecessor counsel, the client filed a single count complaint seeking foreclosure on the loan. The borrower challenged foreclosure, asserting that the signature on the mortgage “appeared not to be” his own. In light of this challenge to the validity of the mortgage, Adam Leitman Bailey, P.C. was hired to develop a strategy to secure the lender’s right to foreclose despite the contested signature. Adam Leitman Bailey, P.C. began aggressive discovery and obtained valuable admissions during borrower’s deposition, including his admission under oath that he both secured the loan from lender’s predecessor-in-interest and used proceeds from the loan to both pay off a prior mortgage and lien and to make improvements to the mortgaged property.
Adam Leitman Bailey, P.C. moved for summary judgment based on the mortgage documents and borrower’s admissions, which the court granted. Borrower appealed; and the Appellate Division reversed based on the purported factual dispute regarding borrower’s signature on the mortgage. After the unexpected reversal, Adam Leitman Bailey, P.C. rapidly developed a new litigation strategy that circumvented borrower’s forgery defense and secured lender’s rights in the property by successfully amending the complaint, over borrower’s objections, to include new claims for an equitable lien and equitable subrogation.
An equitable lien is granted to a lender who has lent money on a property that – as here – was used to pay off other liens, mortgages, or to make improvements to the property. The purpose of an equitable lien is to prevent unjust enrichment of a borrower at the expense of the lender. Likewise, the doctrine of equitable subrogation prevents unjust enrichment by entitling a lender to a recordable equitable mortgage with the same rights, remedies, and interests as the holder of any prior mortgages or liens in the amount of any money used to pay off such mortgages and liens. Significantly, even where a borrower challenges the validity of a mortgage based on an allegedly forged signature, the lender is still entitled to an equitable lien and equitable subrogation related to the liens and debt satisfied by its loan.
Based on the borrower’s own admissions here regarding his use of the proceeds from Adam Leitman Bailey, P.C. clients loan, Adam Leitman Bailey, P.C. moved for summary judgment on both of the new equitable claims. In an opinion that resoundingly favored our client, and utterly discounted each of borrower’s defenses, the court awarded the lender an equitable mortgage, equitable lien, and judgment with interest from the date of its loan, which is rare in any circumstance.
This case underscores how Adam Leitman Bailey, P.C. will always search for creative arguments to secure our client’s interests in the toughest circumstances, even securing restitution on loans that may be considered otherwise invalid.
Colin Kaufman, Eric S. Askanase, and Vladimir Mironenko, attorneys at Adam Leitman Bailey P.C., represented the client on this matter.